EverQuote Inc

1. Nature of the Business and Basis of Presentation

EverQuote, Inc. (the “Company”) was incorporated in the state of Delaware in 2008. Through its internet websites, the Company operates an online marketplace for consumers shopping for auto, home and renters and life insurance. The Company generates revenue primarily by selling consumer referrals to insurance provider customers, consisting of carriers and agents, and indirect distributors in the United States. The Company also generates revenue from commission fees paid by insurance provider customers for insurance policies it sells to consumers. In June 2023, the Company committed to exiting its health insurance vertical, and in August 2023, the Company sold health insurance vertical assets by selling its former subsidiary, Eversurance LLC (see Note 16).

The Company is subject to a number of risks and uncertainties common to companies in similar industries and stages of development including, but not limited to, rapid technological changes, competition from substitute products and services from larger companies, protection of proprietary technology, customer concentration, patent litigation, the need to obtain additional financing to support growth and dependence on third parties and key individuals.

The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception, the Company has incurred operating losses, including a net loss of$51.3 million for the year ended December 31, 2023. As of December 31, 2023, the Company had an accumulated deficit of$213.3 million. As of the issuance date of these consolidated financial statements, the Company expects that its cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the issuance date of the consolidated financial statements, without considering borrowing availability under the Company’s credit facility.

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition and the valuation of accounts and commissions receivables, the expensing and capitalization of website and software development costs, the valuation of goodwill and acquired intangible assets, the valuation of contingent consideration liabilities, the valuation of stock-based awards and income taxes. The Company bases its estimates on historical experience, known trends and other market-specific or relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in periods in which they become known. These estimates may change, as new events occur and additional information is obtained and actual results could differ materially from these estimates.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Concentrations of Credit Risk and of Significant Customers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts and commissions receivable. The Company maintains its cash and cash equivalents at accredited financial institutions. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company sells its consumer referrals to insurance provider customers, consisting of carriers and agents, and indirect distributors in the United States. For the year ended December 31, 2023, one customer represented 18% of total revenue. For the year ended December 31, 2022, two customers represented 21% and 11%, respectively, of total revenue. For the year ended December 31, 2021, one customer represented 16% of total revenue. As of December 31, 2023, one customer accounted for 42% of the total accounts and commissions receivable balance. As of December 31, 2022, one customer accounted for 23% of the total accounts and commissions receivable balance.

Accounts Receivable

The Company provides credit to customers in the ordinary course of business and believes its credit policies are prudent and reflect industry practices and business risk. The Company monitors economic conditions to identify facts or circumstances that may indicate that its receivables are at risk of collection. The Company provides reserves against accounts receivable for estimated losses, if any, that may result from a customer’s inability to pay based on the composition of its accounts receivable, current economic conditions, and historical credit loss activity. Amounts determined to be uncollectible are charged or written-off against the reserve. As of December 31, 2023 and 2022, the Company’s allowance for credit losses was less than $0.1 million and $0.7 million, respectively. During the year ended December 31, 2023, the Company wrote off $0.9 million of uncollectible accounts. During the years ended December 31, 2022 and 2021, the Company wrote off an insignificant amount of uncollectible accounts.

Revenue Recognition

The Company derives its revenue primarily by selling consumer referrals to its insurance provider customers, including insurance carriers, agents and indirect distributors. The Company also generates revenue from commission fees for the sale of policies, primarily in its automotive insurance vertical, and prior to its exit from health, in its health insurance vertical. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606 Revenue from Contracts with Customers (“ASC 606”), the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when collectibility of the consideration to which the Company is entitled in exchange for the goods or services it transfers to the customer is determined to be probable. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

Referral Revenue

The Company recognizes referral revenue when it satisfies its performance obligations by delivering the referrals to its customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those referrals.

Commission Revenue

The Company’s commission revenue consists of the estimated constrained lifetime values (the “constrained LTVs”) of commission payments that the Company expects to receive in its automotive insurance vertical, and prior to its exit from health, that it expected to receive in its health insurance vertical on the sale of insurance policies to consumers and renewals of such policies. Commission revenue is recognized upon satisfaction of the Company’s performance obligation. The Company considers its performance obligation related to commissions for both the initial policy sale and future renewals of the policy to be satisfied upon submission of the policy application. Therefore, a significant portion of the commission revenue the Company records upon satisfaction of its performance obligation is paid by the Company’s insurance provider customer over a multi-year time frame as policyholders renew and pay the insurance provider for their policies. The current portion of commissions receivable consists of estimated commissions on new policies sold and estimated renewal commissions on policies expected to be renewed within one year, while the non-current portion of commissions receivable are commissions for estimated renewals expected to be renewed beyond one year. Commission revenue represented less than 10% of total revenue for the year ended December 31, 2023.

Commission revenue from auto insurance carriers consists of constrained LTVs of commission payments the Company expects to receive for selling an insurance policy based on the effective date of the policy. The Company’s estimate of constrained LTVs is based on an analysis of historical commission payment trends for relevant policies to establish an expected lifetime value and incorporates management’s judgment in interpreting those trends to calculate LTVs and to apply constraints to such LTVs. The most significant factor impacting historical trends is average policy duration. The Company applies a constraint to its estimated LTVs to only recognize the amount of variable consideration that it believes is probable that it will be entitled to receive and will not be subject to a significant revenue reversal in the future. To the extent that commission payment trends change or the underlying factors impacting commission payments change, the Company’s estimate of constrained LTVs could be materially impacted. To the extent the Company makes changes to its estimates of constrained LTVs, it recognizes any material impact of the change to commission revenue in the reporting period in which the change is made, including revisions of estimated lifetime commissions either below or in excess of previously estimated constrained LTVs recognized as an adjustment to revenue and the related contract asset. The Company recognizes revenue for new policies by applying the latest estimated constrained LTV for that product.

Prior to the Company's exit from the health insurance vertical, the Company estimated commission revenue for each health insurance product by using a portfolio approach to a group of policies by product type and the application submission date of the relevant policy, which were referred to as “cohorts.”

Disaggregated Revenue

The Company presents disaggregated revenue from contracts with customers by distribution channel, as the distribution channel impacts the nature and amount of the Company’s revenue, and by vertical market segment. The Company’s direct distribution channel consists of insurance carriers and third-party agents. The Company’s indirect distribution channel consists of insurance aggregators and media networks who purchase referrals with the intent to resell. Revenue generated via the Company’s direct distribution channel is generally higher per referral than revenue generated by the Company’s indirect distribution channels and provides the Company with additional insights and data regarding insurance provider demand and referral performance.

Total revenue is comprised of revenue from the following distribution channels:

Total revenue is comprised of revenue from the following insurance verticals (in thousands):

The Company has elected to apply the practical expedient in ASC 606 to expense incremental direct costs of obtaining a contract, consisting of sales commissions, as incurred as the expected period of benefit of the sales commissions isone year or less. At December 31, 2023 and 2022, the Company had not capitalized any costs to obtain any of its contracts.

Deferred Revenue

Amounts received for referrals prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the accompanying balance sheets. Amounts expected to be recognized as revenue within 12 months of the balance sheet date are classified as current deferred revenue. Deferred revenue was $1.9 million as of December 31, 2023 and 2022, respectively. During the year ended December 31, 2023, the Company recognized revenue of $1.3 million that was included in the contract liability balance (deferred revenue) at December 31, 2022. The Company recognizes deferred revenue by first allocating from the beginning deferred revenue balance to the extent that the beginning deferred revenue balance exceeds the revenue to be recognized. Billings during the period are added to the deferred revenue balance to be recognized in future periods.

Commissions Receivable

Commissions receivable are contract assets that represent estimated variable consideration for commissions to be received from insurance carriers for performance obligations that have been satisfied. The current portion of commissions receivable are estimated commissions expected to be received within one year, while the non-current portion of commissions receivable are expected to be received beyond one year.

The Company assesses impairment for uncollectible consideration when information available indicates it is probable that an asset has been impaired. There wereno impairments recorded during the years ended December 31, 2023, 2022 or 2021.

While the Company is exposed to credit losses due to the non-payment by insurance carriers, it considers the risk of this to be remote.

Goodwill and Acquired Intangible Assets

The Company records goodwill when consideration paid in a business acquisition exceeds the value of the net assets acquired. The Company’s estimates of fair value are based upon assumptions believed to be reasonable at that time but that are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results. During the measurement period, which extends no later than one year from the acquisition date, the Company may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, all adjustments are recorded in the consolidated statements of operations and comprehensive loss as operating expenses or income.

Goodwill is not amortized, but rather is tested for impairment annually in the fourth quarter, or more frequently if facts and circumstances warrant a review, such as significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. The Company assesses both the existence of potential impairment and the amount of impairment loss by comparing the fair value of the reporting unit with its carrying amount, including goodwill. Intangible assets are recorded at their estimated fair values at the date of acquisition. The Company amortizes acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Valuation of Contingent Consideration

The Company’s two acquisitions in 2021 and 2020 provided for shares of Class A common stock to be issued to former owners of the purchased entities upon the achievement of certain revenue targets (see Note 3). Achievement of revenue targets that result in the issuance of a variable number of shares of Class A common stock are accounted for as a liability. The Company estimates the fair value of the shares of Class A common stock issuable upon achievement of the targets as of the acquisition date. The Company remeasures the fair value of the shares of Class A common stock issuable at each subsequent reporting date until the liability is fully settled. The Company uses Monte Carlo simulation models in its estimates. The estimated fair value of the contingent consideration is based upon available information and certain assumptions, known at the time of its estimates, which management believes are reasonable.

Deferred Financing Costs

The Company capitalizes lender, legal and other third-party fees that are directly associated with obtaining access to capital under credit facilities. Deferred financing costs incurred in connection with obtaining access to capital are recorded in prepaid expenses and other current assets and are amortized over the availability period or term of the credit facility. Deferred financing costs related to a recognized debt liability are recorded as a direct reduction of the carrying amount of the debt liability and amortized to interest expense on an effective interest basis over the repayment term.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset as follows:

Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in loss from operations on the statements of operations and comprehensive loss. Expenditures for repairs and maintenance are charged to expense as incurred.

Leases

The Company accounts for leases under ASC Topic 842, Leases (“ASC 842”). In accordance with ASC 842, the Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, the Company determines the initial classification and measurement of its right-of-use asset and lease liability at the lease commencement date and thereafter if modified. The lease term includes any renewal options that the Company is reasonably assured to exercise. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term. The Company’s policy is to not record leases with an original term of 12 months or less on its consolidated balance sheets and recognizes those lease payments in the income statement on a straight-line basis over the lease term. The Company’s existing leases are for office space.

In addition to rent, the leases may require the Company to pay additional costs, such as utilities, maintenance and other operating costs, which are generally referred to as non-lease components. The Company has elected to not separate lease and non-lease components. Only the fixed costs for lease components and their associated non-lease components are accounted for as a single lease component and recognized as part of a right-of-use asset and lease liability. Rent expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expense in the consolidated statements of operations and comprehensive loss.

Impairment of Long-Lived Assets

Long-lived assets consist primarily of property and equipment, right-of-use assets and intangible assets with finite lives. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized in loss from operations when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows. In connection with its restructuring and exit from the health vertical in 2023, the Company recorded impairments of a right-of-use asset (see Note 16). The Company didnot record any impairment losses on long-lived assets during the years ended December 31, 2022 or 2021.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

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Level 1—Quoted prices in active markets for identical assets or liabilities.

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Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

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Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and contingent consideration liabilities are carried at fair value, determined according to the fair value hierarchy described above (see Note 4). The carrying values of the Company’s accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities. Commissions receivable are recorded at constrained lifetime values.

Segment Information

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company operates an online marketplace for consumers shopping for auto, home and renters and life insurance quotes and generates revenue from referral fees and commission payments. Significantly all of the Company’s tangible assets are held in the United States.

Research and development expenses consist primarily of personnel-related expenses (wages, fringe benefit costs and stock-based compensation expense) for product management and software development. Research and development costs are expensed as incurred, except for certain costs which are capitalized in connection with the development of the Company’s website and internal-use software.

Costs incurred in the preliminary and post-implementation stages of development are expensed as incurred. Once an application has reached the development stage, internal costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing performed to ensure the product is ready for its intended use. The Company also capitalizes costs related to specific upgrades and enhancements of its website and internal-use software when it is probable that the expenditures will result in additional functionality. Maintenance and training costs are expensed as incurred. Capitalized software costs are recorded as part of property and equipment and are amortized on a straight-line basis over an estimated useful life ofthree years.

Advertising Expense

Advertising expense consists of variable costs that are related to attracting consumers to the Company’s marketplace and generating consumer quote requests, including through its verified partner network, and promoting its marketplace to insurance carriers and agents. The Company expenses advertising costs as incurred and such costs are included in sales and marketing expense in the accompanying statements of operations and comprehensive loss. During the years ended December 31, 2023, 2022 and 2021, advertising expense totaled $187.6 million, $275.9 million and $289.0 million, respectively.

The Company measures compensation expense for stock options with service-based vesting or performance-based vesting granted to employees, nonemployees and directors based on the fair value on the date of grant using the Black‑Scholes option‑pricing model. The Company measures compensation expense for stock options with market-based vesting based on the fair value on the date of grant using a Monte Carlo simulation model. The Company measures compensation expense for restricted common stock units based on the fair value on the date of grant using the market value of the Company’s common stock. Compensation expense for employee awards is recognized, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. The Company uses the straight‑line method to record the expense of employee awards with only service‑based vesting conditions. The Company uses the graded‑vesting method to record the expense of employee awards with both service‑based and performance‑based vesting conditions, commencing once achievement of the performance condition becomes probable. Compensation expense for nonemployee awards is recognized in the same manner as if the Company had paid cash for the goods or services received, which is generally the vesting period of the respective award.

The Company classifies stock-based compensation expense in its statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Foreign Currency Translation

The functional currency of the Company’s foreign subsidiaries is the currency of the local country. Assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using the period-end exchange rates, and income and expense items are translated into U.S. dollars using average exchange rates in effect during each period. The effects of these foreign currency translation adjustments are included in accumulated other comprehensive loss, a separate component of stockholders’ equity. The Company also incurs transaction gains and losses resulting from intercompany transactions as well as transactions with customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded. Foreign currency transaction gains (losses) are included in the consolidated statements of operations and comprehensive loss as a component of other income (expense) and have not been significant.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. The Company’s only element of other comprehensive loss is foreign currency translation adjustments.

Net Income (Loss) per Share

Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock options and unvested restricted stock units. For periods in which the Company reported a net loss, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The Company has two classes of common stock outstanding: Class A common stock and Class B common stock. As more fully described in Note 9, the rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class B common stock is convertible into one share of Class A common stock at the option of the holder at any time. The Company allocates undistributed earnings attributable to common stock between the common stock classes on a one-to-one basis when computing net income (loss) per share. As a result, basic and diluted net income (loss) per share of Class A common stock and Class B common stock are equivalent.

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

The table above does not include shares issuable upon settlement of contingent consideration for the Company’s acquisitions (see Note 3). Such shares are also not included in the Company’s calculation of basic or diluted net loss per common share until issued.

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. The Company’s policy is to record interest and penalties related to income taxes as part of the tax provision.

Recently Issued Accounting Pronouncements

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820), which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The guidance includes disclosure requirements including the fair value of equity securities subject to contractual sale restrictions included in the balance sheet, the nature and remaining duration of the restriction and circumstances that could cause a lapse in the restriction. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted. The amendments in this update are to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.

3. Acquisitions

PolicyFuel

On August 13, 2021, the Company completed the acquisition of Policy Fuel, LLC and its affiliated entities (“PolicyFuel”), a policy-sales-as-a-service provider, with principal offices in Austin and San Antonio, Texas. The PolicyFuel acquisition was accounted for as a purchase of a business under ASC Topic 805, Business Combinations. Under the acquisition method of accounting, the assets and liabilities of PolicyFuel were recorded at their respective fair values as of the acquisition date. The purchase consideration included contingent consideration that could be settled in a variable number of shares of Class A common stock based on the achievement (at varying levels) of each of three twelve-month revenue targets. As achievement of each of the three twelve-month targets results in the issuance of a variable number of shares of Class A common stock, the Company recorded a liability for the fair value of this contingent consideration. The Company estimated the fair value of the contingent consideration liability as of the acquisition date using a Monte Carlo simulation model. The Company remeasures the fair value of the contingent consideration at each subsequent reporting date until the liability is fully settled (see Note 4).

Eversurance

On September 1, 2020, the Company completed the acquisition of Crosspointe Insurance & Financial Services, LLC, a health insurance agency headquartered in Evansville, Indiana. In the third quarter 2021, the Company changed the name of Crosspointe Insurance & Financial Services, LLC to Eversurance, LLC (“Eversurance”). The Eversurance acquisition was accounted for as a purchase of a business under ASC Topic 805, Business Combinations. Under the acquisition method of accounting, the assets and liabilities of Eversurance were recorded as of the acquisition date, at their respective fair values. The purchase consideration included contingent consideration representing the fair value of Class A common stock issuable to the former owners of Eversurance upon achievement of certain revenue targets over three years, the first two annual targets comprised of a fixed number of shares of Class A common stock that could be issued and the third annual target comprised of a variable number of shares of Class A common stock. As achievement of the third annual targets resulted in the issuance of a variable number of shares of Class A common stock, the Company recorded a liability for the fair value of this contingent consideration. The Company estimated the fair value of the contingent consideration liability as of the acquisition date using a Monte Carlo simulation model. The Company remeasured the fair value of the shares of Class A common stock issuable upon the estimated achievement levels of the third annual target at each subsequent reporting date until the liability was fully settled in the fourth quarter of 2022 (see Note 4).

4. Fair Value of Financial Instruments

The following tables present the Company’s fair value hierarchy for its assets and liabilities which are measured at fair value on a recurring basis as of December 31, 2023 and 2022 (in thousands):

There wereno transfers into or out of Level 3 during the years ended December 31, 2023, 2022 or 2021.

Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy.

Contingent consideration liabilities are valued by the Company using significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions and estimates to forecast a range of outcomes for the contingent consideration. The Company assesses these assumptions and estimates on a quarterly basis as additional data impacting the assumptions is obtained. Changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized as acquisition-related costs within the consolidated statements of operations and comprehensive loss.

The Company uses a Monte Carlo simulation model in its estimates of the fair value of the contingent consideration liabilities related to the PolicyFuel acquisition in 2021. The most significant assumptions and estimates utilized in the model include forecasted revenue (an acquisition specific input) and the market value of the Company’s Class A common stock (an observable input). Other assumptions utilized in the model include equity volatility, revenue volatility and discount rate. The decrease in fair value of the contingent consideration liability during the year ended December 31, 2023 was due to a change in estimate of forecasted revenue. The decrease in fair value of the contingent consideration liability during the year ended December 31, 2022 was primarily due to a change in estimate of forecasted revenue and the decrease in market value of the Company’s Class A common stock. The increase in the fair value of the contingent consideration liability for the year ended December 31, 2021 was primarily due to a change in estimate of forecasted revenue, partially offset by the decrease in the market value of the Company’s Class A common stock during the year. In December 2022, the Company issued shares of Class A common stock in settlement of the first annual milestone, at which time the fair value of the contingent consideration liability for the first milestone was reclassified to stockholders' equity.

The Company estimated the fair value of the contingent consideration liability related to the Eversurance acquisition in 2020 (see Note 3) using probability of achievement of the revenue target (acquisition specific input) and the market value of the Company’s Class A common stock (observable input). Shares of Class A common stock were issued in December 2022 to settle the third and final milestone at which time the fair value of the contingent consideration liability was reclassified to stockholders' equity.

The following table provides a roll-forward of the aggregate fair values of the Company’s contingent consideration liabilities for which fair value is determined by Level 3 inputs (in thousands):

5. Goodwill and Acquired Intangible Assets

Goodwill is not amortized, but instead is reviewed for impairment at least annually or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The Company considers its business to beone reporting unit for purposes of performing its goodwill impairment analysis. To date, the Company has hadno impairments to goodwill.

There wereno changes to goodwill as of December 31, 2023 or 2022.

Acquired intangible assets consisted of the following (in thousands):

In August 2023, the Company sold Eversurance LLC, which included health-related intangible assets with a gross amount of $3.9 million, accumulated amortization of $2.9 million and a carrying value of $1.0 million (see Note 16). Amortization expense for intangible assets for the years ended December 31, 2023, 2022 and 2021 was$1.8 million, $2.3 million and $1.7 million, respectively.

Future amortization expense of the intangible assets as of December 31, 2023, is expected to be as follows (in thousands):

6. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Depreciation and amortization expense was$4.4 million, $3.6 million and $3.3 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company capitalized costs associated with the development of internal use software of $3.6 million, $3.6 million and $2.2 million included in the Software line item above and recorded related amortization expense of $3.7 million, $2.7 million and $2.6 million (included in depreciation and amortization expense) during the years ended December 31, 2023, 2022 and 2021, respectively. The remaining net book value of capitalized software costs was $5.2 million and $5.3 million as of December 31, 2023 and 2022, respectively.

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

8. Loan and Security Agreement

On July 15, 2022, the Company executed a Loan and Security Modification Agreement (the “2022 Loan Amendment”) to amend its Amended and Restated Loan and Security Agreement, dated as of August 7, 2020 (the “2020 Loan Agreement”) with Western Alliance Bank (the “Lender”), to increase the revolving line of credit available thereunder from $25.0 million to $35.0 million, to extend the maturity date of the revolving line of credit from August 2022 to July 2025 and to provide the Company access to a term loan of up to $10.0 million. The 2020 Loan Agreement, as amended by the 2022 Loan Amendment, is referred to as the “2022 Amended Loan Agreement.” On August 1, 2023, in connection with the sale of Eversurance LLC (see Note 16), the Company entered into a Loan and Security Modification Agreement (the “2023 Consent and Release”), pursuant to which the Lender consented to the sale of Eversurance LLC and released any security interests it had in the membership interests of Eversurance LLC. On August 7, 2023, the Company executed a Loan and Security Modification Agreement (the “2023 Loan Amendment”) to amend the 2022 Amended Loan Agreement to, among other things, eliminate the term loan availability, decrease the revolving line of credit from $35.0 million to $25.0 million, update the interest rate on outstanding borrowings to the greater of 7.0% or the prime rate as published in The Wall Street Journal and update certain financial and other covenants. The 2022 Loan Agreement, as amended by the 2023 Consent and Release and the 2023 Loan Amendment, is referred to as the “2023 Amended Loan Agreement.”

Pursuant to the 2023 Loan Amendment the minimum asset coverage ratio, fixed charge coverage ratio and leverage ratio covenants were eliminated and replaced with an adjusted quick ratio covenant. As of the effective date of the 2023 Loan Amendment and through the maturity date, the Company is required to maintain a minimum adjusted quick ratio of 1.10 to 1.00. “Adjusted Quick Ratio” is defined as the ratio of (1) the sum of (x) unrestricted cash and cash equivalents held at the Lender plus (y) net accounts receivable reflected on the Company’s balance sheet to (2) current liabilities, including all borrowings outstanding under the 2023 Amended Loan Agreement, but excluding the current portion of deferred revenue, in each case determined in accordance with GAAP. At any time the Adjusted Quick Ratio is less than 1.30 to 1.00 the Lender shall have the ability to use the Company's cash receipts to repay outstanding obligations until such time as the Adjusted Quick Ratio is equal to or greater than 1.30 to 1.00 for two consecutive months. The Company has agreed to certain other affirmative and negative covenants to which it will remain subject until maturity. Such covenants include limitations on the Company’s ability to incur additional indebtedness, as described below, and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses.

Pursuant to the 2023 Amended Loan Agreement, borrowings under the revolving line of credit cannot exceed 85% of eligible accounts receivable balances, bear interest at the greater of 7.0% or the prime rate as published in The Wall Street Journal and mature on July 15, 2025. In an event of default, as defined in the 2023 Amended Loan Agreement, and until such event is no longer continuing, the annual interest rate to be charged would be the annual rate otherwise applicable to borrowings under the 2023 Amended Loan Agreement plus 5.00%. Borrowings are collateralized by substantially all of the Company's assets and property. As of December 31, 2023, the Company was in compliance with the covenants in the 2023 Amended Loan Agreement and the Company hadno amounts outstanding under the revolving line of credit.

9. Equity

Each share of Class A common stock entitles the holder to one vote for each share on all matters submitted to a vote of the Company’s stockholders at all meetings of stockholders and written actions in lieu of meetings. Each share of Class B common stock entitles the holder to ten votes for each share on all matters submitted to a vote of the Company’s stockholders at all meetings of stockholders and written actions in lieu of meetings.

Holders of both classes of common stock are entitled to receive dividends, when and if declared by the board of directors.

Each share of Class B common stock is convertible into one share of Class A common stock at the option of the holder at any time. Automatic conversion shall occur upon the occurrence of a transfer of such share of Class B common stock or at the date and time, or the occurrence of an event, specified by a vote or written consent of the holders of a majority of the voting power of the then outstanding shares of Class B common stock. A transfer is described as a sale, assignment, transfer, conveyance, hypothecation or disposition of such share or any legal or beneficial interest in such share other than certain permitted transfers as described in the Restated Certificate of Incorporation, including a transfer to a holder of Preferred Stock. Each share of Class B common stock held by a stockholder shall automatically convert into one fully paid and non-assessable share of Class A common stock nine months after the death or incapacity of the holder of such Class B common stock.

During the year ended December 31, 2022, the Company issued 62,671 shares of Class A common stock to the former owners of PolicyFuel upon achievement of the first target of the contingent consideration arrangement (see Note 3). During the year ended December 31, 2022, the Company issued 58,754 shares of Class A common stock to the former owners of Eversurance upon achievement of the third and final target of the contingent consideration arrangement. During the year ended December 31, 2021, the Company issued 39,168 shares of Class A common stock to the former owners of Eversurance upon achievement of the first two targets of the contingent consideration arrangement (see Note 3).

During the year ended December 31, 2022, the Company sold 1,004,016 shares of Class A common stock at a purchase price of $14.94 per share for gross proceeds of $15.0 million in a private placement to a related party (see Note 15).

10. Stock-Based Compensation

2008 and 2018 Plans

The Company has outstanding awards under its 2008 Stock Incentive Plan, as amended (the “2008 Plan”), but is no longer granting awards under this plan. Shares of common stock issued upon exercise of stock options granted prior to September 8, 2017 will be issued as either Class A common stock or Class B common stock. Shares of common stock issued upon exercise of stock options granted after September 8, 2017 will be issued as Class A common stock.

The Company’s 2018 Equity Incentive Plan (the “2018 Plan” and, together with the 2008 Plan, the “Plans”) provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards. The number of shares initially reserved for issuance under the 2018 Plan is the sum of 2,149,480 shares of Class A common stock, plus the number of shares (up to 5,028,832 shares) equal to the sum of (i) the 583,056 shares of Class A common stock and Class B common stock that were available for grant under the 2008 Plan upon the effectiveness of the 2018 Plan and (ii) the number of shares of Class A common stock and Class B common stock subject to outstanding awards under the 2008 Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject, in the case of incentive stock options, to any limitations of the Internal Revenue Code). The number of shares of Class A common stock that may be issued under the 2018 Plan will automatically increase on the first day of each fiscal year until, and including, the fiscal year ending December 31, 2028, equal to the least of (i)2,500,000 shares of Class A common stock; (ii)5% of the sum of the number of shares of Class A common stock and Class B common stock outstanding on the first day of such fiscal year; and (iii) an amount determined by the Company’s board of directors. The shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, repurchased or are otherwise terminated by the Company under the 2018 Plan will be added back to the shares of common stock available for issuance under the 2018 Plan. As of December 31, 2023,1,742,518 shares remained available for future grant under the 2018 Plan. The number of authorized shares reserved for issuance under the 2018 Plan was increased by 1,708,925 shares effective as of January 1, 2024 in accordance with the provisions of the 2018 Plan described above.

Options and restricted stock units (“RSUs”) granted under the Plans vest over periods determined by the board of directors. Options granted under the Plans expire no longer thanten years from the date of the grant. The exercise price for stock options granted is not less than the fair value of common shares based on quoted market prices. Certain of the Company’s RSUs are net settled by withholding shares of the Company’s Class A common stock to cover statutory income taxes.

Stock Option Valuation

The fair value of stock option grants with service-based or performance-based vesting conditions is estimated on the date of grant using the Black Scholes option pricing model. The volatility has been determined using the Company’s traded stock price to estimate expected volatility. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The relevant data used to determine the fair value of the stock option grants during the years ended December 31, 2023 and 2022 is as follows, presented on a weighted-average basis:

The grant date fair value of stock options granted during the years ended December 31, 2023 and 2022 was $7.57 and $6.79 per share, respectively. The Company didnot grant stock options in the year ended December 31, 2021.

Stock Option Activity

The following table summarizes the Company’s option activity since December 31, 2022:

As of December 31, 2023, outstanding options of 1,911,727 were for the purchase of Class A common stock and outstanding options of 407,998 were for the purchase of either Class A common stock or Class B common stock.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had strike prices lower than the fair value of the Company’s common stock.

The aggregate intrinsic value of options exercised during the years ended December 31, 2023, 2022 and 2021 was $0.9 million, $1.0 million and $12.9 million, respectively.

Restricted Stock Units

The Company has granted RSUs with service-based vesting conditions and with both service-based and performance-based vesting conditions. RSUs with service-based and both service-based and performance-based vesting conditions are valued on the grant date using the grant date market price of the underlying shares.

The following table summarizes the Company’s RSU activity since December 31, 2022:

Inducement Awards

In connection with the acquisition of PolicyFuel in 2021, the Company granted service- and service- and performance-based RSUs to newly hired employees. The RSUs were approved by the Company’s board of directors and were granted as an inducement material to the new employees entering into employment with the Company in accordance with Nasdaq Rule 5635(c)(4) (the “Inducement Awards”). The Inducement Awards were granted outside of the 2018 Plan.

The Company recorded stock-based compensation expense in the following expense categories of its statements of operations and comprehensive loss (in thousands):

As of December 31, 2023, unrecognized compensation expense for RSUs and option awards was $21.9 million, which is expected to be recognized over a weighted average period of 2.0 years.

11. Income Taxes

The Company hasnot recorded income tax benefits for net operating losses incurred or research and development tax credits generated, as the Company believed, based upon the weight of available evidence, that it is more likely than not that its net operating loss and tax credit carryforwards will not be realized. The Company’s income tax expense for the year ended December 31, 2023 related to foreign and state income taxes. The Company did not record income tax expense for the year ended December 31, 2022, as taxable income was offset by net operating loss carryforwards. During the year ended December 31, 2021, the Company released $2.5 million of its valuation allowance related to the net deferred tax liability recorded as a result of the PolicyFuel acquisition. The Company maintains a valuation allowance on its overall net deferred tax asset as it is deemed more likely than not the net deferred tax asset will not be realized.

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:

Net deferred tax assets as of December 31, 2023 and 2022 consisted of the following (in thousands):

As of December 31, 2023, the Company had federal net operating loss carryforwards of$113.1 million to offset future taxable income, which do not expire but are limited in their usage to an annual deduction equal to 80% of annual taxable income. As of December 31, 2023, the Company had state net operating loss carryforwards of$106.8 million, which may be available to offset future taxable income and expire at various dates beginning in 2027. As of December 31, 2023, the Company also had federal and state research and development tax credit carryforwards of$5.9 million and$3.9 million, respectively, which may be available to reduce future tax liabilities and expire at various dates beginning in 2030 and 2029, respectively.

Utilization of the U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 and Section 383 of the Internal Revenue Code ("IRC") of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. In 2019, the Company performed an analysis of the ownership changes as defined within IRC Section 382(g) during the period beginning with the first issuance of the Company’s stock on August 8, 2008 through June 30, 2019. It was determined that it is more likely than not that the Company did not undergo an ownership change within the meaning of IRC Section 382(g) during the analysis period. Therefore, net operating losses for that period are not limited and are available to cover future taxable income. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since June 30, 2019 due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since June 30, 2019, utilization of the net operating loss carryforwards or research and development tax credit carryforwards generated after June 30, 2019 may be subject to an annual limitation, which would be determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of such net operating loss carryforwards or research and development tax credit carryforwards before utilization.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets, which are comprised primarily of net operating loss carryforwards and research and development tax credit carryforwards. Management has considered the Company’s history of cumulative net losses incurred since inception and estimated future taxable income and has concluded that it is more likely than not that the Company will not realize the benefits of federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2023 and 2022. The Company reevaluates the positive and negative evidence at each reporting period.

The increase in the valuation allowance for deferred tax assets during the year ended December 31, 2023 related primarily to increases in net operating losses and capitalized research and development costs. The increase in the valuation allowance for deferred tax assets during the year ended December 31, 2022 related primarily to capitalized research and development costs due to the new requirement to capitalize research and development costs under IRC Section 174, partially offset by a decrease in net operating loss carryforwards that were used to offset taxable income. The Company generated taxable income for the year ended December 31, 2022 due to the requirement to capitalize research and development costs. The increase in the valuation allowance for deferred tax assets during the year ended December 31, 2021 related primarily to an increase in net operating loss carryforwards and research and development tax credit carryforwards and stock-based compensation expense. The changes in the valuation allowance were as follows (in thousands):

The Company assesses the uncertainty in its income tax positions to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more-likely-than-not threshold, the tax amount recognized in the consolidated financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon the ultimate settlement with the relevant taxing authority. No reserve for uncertain tax positions or related interest and penalties has been recorded at December 31, 2023 and 2022.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company is open to future tax examination under statute from 2019 to the present, however, carryforward attributes that were generated prior to January 1, 2020 may still be adjusted upon examination by federal, state or local tax authorities if they either have been or will be used in a future period.

12. Leases

The Company leases office space in Cambridge, Massachusetts under a non-cancelable operating lease that expires in September 2024. The Company also leases office space in Austin, Texas under a non-cancelable operating lease that expires in April 2025. In connection with the acquisition of Eversurance, the Company acquired a ten-year non-cancelable operating lease in Evansville, Indiana that expires in August 2030. In connection with the sale of Eversurance LLC in August 2023, the Evansville, Indiana office lease was transferred to the buyers of Eversurance LLC. The carrying value of the right-of-use asset and related operating lease liability was $1.1 million each as of August 1, 2023, and as a result, there was no loss related to the lease (see Note 16). As part of the Company's restructuring in 2023, the Company subleased a portion of office space in its Cambridge, Massachusetts headquarters for the remaining term of its lease through September 2024 to two third parties for total payments of approximately $0.3 million. In connection with entering into the subleases, the Company recorded an asset impairment of $0.4 million in restructuring and other charges in the consolidated statements of operations and comprehensive loss (see Note 16).

As of December 31, 2023, the Company maintained security deposits of $0.4 million with the landlords of its leases, which amounts were included in prepaid expenses and other current assets on the Company’s consolidated balance sheet. As of December 31, 2022, the Company maintained security deposits of $0.5 million with the landlords of its leases, which amounts were included in other assets on the Company’s consolidated balance sheet.

The components of lease cost under ASC 842 were as follows (in thousands):

Supplemental disclosure of cash flow information related to leases was as follows (in thousands):

The weighted-average remaining lease term and discount rate were as follows:

Because the interest rate implicit in the lease was not readily determinable, the Company's incremental borrowing rate was used to calculate the present value of the leases. In determining its incremental borrowing rate, the Company considered its credit quality and assessed interest rates available in the market for similar borrowings, adjusted for the impact of collateral over the term of the lease.

Future annual lease payments under the Company’s leases as of December 31, 2023 were as follows (in thousands):

Total operating lease liabilities in the table above are classified on the consolidated balance sheet as follows (in thousands):

13. Commitments and Contingencies

Leases

The Company's commitments under its leases are described in Note 12.

Indemnification Agreements

In the normal course of business, the Company may provide indemnification of varying scope and terms to third parties and enters into commitments and guarantees (“Agreements”) under which it may be required to make payments. The duration of these Agreements varies, and in certain cases, is indefinite. Furthermore, many of these Agreements do not limit the Company’s maximum potential payment exposure.

In addition, the Company has entered into indemnification agreements with members of its board of directors and executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.

Through December 31, 2023, the Company has not incurred any material costs as a result of such indemnifications. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of December 31, 2023 and 2022.

Legal Proceedings and Other Contingencies

The Company is from time to time subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of its business. While the outcome of these other claims cannot be predicted with certainty, management does not believe that the outcome of any of these other legal matters will have a material adverse effect on the Company’s consolidated results of operations or financial condition.

14. Retirement Plan

The Company has established a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis. As currently established, the Company is not required to make any contributions to the 401(k) Plan. The Company contributed $0.9 million during each of the years ended December 31, 2023, 2022 and 2021.

15. Related Party Transactions

The Company has, in the ordinary course of business, entered into arrangements with other companies who have shareholders in common with the Company. Pursuant to these arrangements, related-party affiliates receive payments for providing website visitor referrals. During the years ended December 31, 2023, 2022 and 2021, the Company recorded expense of $3.6 million, $8.2 million and $3.5 million, respectively, related to these arrangements. During the years ended December 31, 2023, 2022 and 2021, the Company paid $4.0 million, $7.8 million and $3.8 million, respectively, related to these arrangements. As of December 31, 2023 and 2022, amounts due to related-party affiliates totaled $0.3 million and $0.6 million, respectively, which were included in accounts payable and accrued expenses on the balance sheets.

On February 23, 2022, the Company sold 1,004,016 shares of Class A common stock at a purchase price of $14.94 per share for gross proceeds of $15.0 million in a private placement to Recognition Capital, LLC, an entity which is owned and controlled by David Blundin, Chairman of the board of directors and co-founder of the Company.

16. Restructuring and Other Charges

In June 2023, the Company committed to exiting its health insurance vertical to increase focus on core verticals and implemented a workforce reduction plan (the “Reduction Plan”) to improve operating efficiency. The Reduction Plan included the elimination of 175 employees, or approximately 28%, of the Company’s workforce. During the year ended December 31, 2023, the Company incurred $4.0 million in severance charges in connection with the workforce reduction, consisting of cash expenditures for employee separation costs of $2.7 million that are expected to be paid through August 2024, and non-cash charges for the modification of certain equity awards of $1.3 million. During the year ended December 31, 2023, the Company recorded a credit of $0.2 million to restructuring and other charges in the accompanying consolidated statements of operations and comprehensive loss related to estimated severance payments that were not made.

In August 2023, the Company sold assets related to its health insurance vertical comprised of all of the issued and outstanding membership interests of Eversurance LLC, a former subsidiary of the Company, to MyPlanAdvocate Insurance Solutions Inc. for cash consideration of $13.2 million. There wereno employees of Eversurance LLC at the time of the sale. The assets sold consisted of commissions receivable of $30.8 million, which were expected to be collected over the next seven years, net intangible assets of $1.0 million and other net assets of $0.4 million, including the Company’s Evansville, Indiana office lease. The Company incurred $0.4 million of transaction costs in connection with the sale. Accordingly, the Company recognized a loss on sale of assets of $19.4 million during the year ended December 31, 2023, which amount is included in restructuring and other charges in the accompanying consolidated statements of operations and comprehensive loss. The Company also recorded an impairment charge on the right-of-use asset related to its Cambridge, Massachusetts office lease of $0.4 million during the year ended December 31, 2023 in connection with the Company entering into subleases with two third parties for a portion of the office space. The exit of the health insurance vertical and the Reduction Plan are referred to as the Company's recent restructuring, which was completed by September 30, 2023.

The Company’s restructuring and other charges and balance of its restructuring liability, which was included in accrued employee compensation and benefits, consisted of the following (in thousands):